- New Science in old markets -

Equities mixed, extensions in precious metals, bond update

The picture in stocks is still mixed. The sharp rally in US indices ended with a flurry of daily-scale top, extensions, as reported in the June 9th edition and there has been another rise to slight new highs in the last week, now marked by two fresh top extensions in Canada and the NYSE composite:

NYSE and canada top ext


This argues that the present ‘rally is over’ phase still has some way to go but we don’t have a clear view of what happens next. The dominant feature of US equity indices in the longer-term is still the weekly-scale compressions that have broken upward in a couple of Value-line indices (one shown here) and the Russell 2000 small-cap index:

valug & Russ2k weekly comps


This would ordinarily make us think that a new ‘leg’ up is in process in the long, strong rise in US stocks, but these markets are still range-bound, so we are happy to remain short from the advice given in that June 9th edition and even to expect that these new top extensions will keep a lid on the US (and Canada) for a little longer.

There has also been a weekly-scale top extension in Taiwan. We reported a daily-scale top in Hong-Kong (here updated) but did not advise selling any Asian equity markets short – mostly because of our fear of the large amount of Japanese buying of financial market instruments that could ‘leak’ out into the region. Now we are not so scared and would sell Taiwan now or Hong Kong on a rally (of say 1-1.5%) as it is already more than 3% from its highs:

HK dail top upodatye+Taiwan



We may even have better candidates to sell. There were top extensions in both Brent and WTI crude recently as we reported in the last newsletter on June 16th.  Now there has been a pair of top extensions in the Dow Oil and Gas sector index , in the gold mining sector index and in Silver futures:

The last ‘sell-short’ signal that we had in Gold ‘timed out’ a few weeks ago and this is probably a good chance to re-establish that short. Solver is probably too dangerous to short, so try gold instead or any instrument linked to Oil and Gas or precious metal mining. Platinum is compressed at a weekly scale (not shown) so there may be a big move coming in all precious metals and the risks of being short are small for the next week or so because of these fresh extensions.

Sil, Gld mining& oil&gaws exts


Bonds and notes are both still compressing - here are the most recent signals. We still like the long side for now (especially in Germany) but in a continually compressing environment it is prudent to take partial profits in the US on rallies to re-establish longs on dips:

tenyr yield wkly comp,. bonds dly